Although the ongoing COVID-19 pandemic led to partial disruption of face-to-face sales activities, the impact on overall top-line was limited, given non-life insurers’ large base of recurring long-term insurance premiums and strong growth of automobile insurance due to several rounds of industry-wide rate increment exercises in 2019 and early 2020 as well as fast expanding online sales of automobile insurance. Favorable claims experience due to the reduced traffic during the pandemic also contributed to the material improvement in auto insurance operating performance.
Over the last few years, the South Korean non-life segment reported a rising overall expense ratio–to 23.0% in 2019 from 19.0% in 2015–although it appears to have stabilised at 21.9% in 2020. AM Best notes that the over-competition in the general agency channel has receded with the implementation of a regulatory restriction on sales commissions in January 2021 and insurers’ effort to recover bottom lines.
Investment profits, which are companies key source of earnings, declined by 9.4% in 2020 mainly because of the base effect in 2019 when bond disposal gains surged. Despite excluding the impact of disposal gains, AM Best notes that the running yields for financial securities declined as market interest rates mostly remained low, following two rounds of base rate cut by the central bank in early 2020. However, market rates have since rebounded in the second half of 2020, and exceeded pre-pandemic levels as of the first quarter of 2021. AM Best expects significant asset volatility or further sharp deterioration in investment yields are unlikely and insurance company’s investment margin to remain at a similar level over the near term.
Over the next 12 months, AM Best expects non-life companies to maintain a solid pace of expansion, driven by stable growth in the long-term insurance, automobile and general property/casualty insurance segments. AM Best also expects underwriting profitability to remain stable over the next 12 months due to favorable performance in auto segment, despite underwriting pressure in the long-term insurance segment as rising medical claims remain a concern.
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AM Best is a global credit rating agency, news publisher and data analytics provider specialising in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.Copyright © 2021 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.
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https://www.businesswire.com/news/home/20210516005012/en/ContactChanyoung LeeFinancial Analyst+852 2827 3404chanyoung.lee@ambest.comChristopher SharkeyManager, Public Relations+1 908 439 2200, ext. 5159christopher.sharkey@ambest.comJim PeavyDirector, Communications+1 908 439 2200, ext. 5644james.peavy@ambest.comSource : AM Best
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